AAII Sentiment Survey: Bearish Sentiment Above Historical Average, Bullish Continues to Fall

This week saw bearish sentiment rise above the historical average for the first time in 24 weeks. Bullish sentiment declined again, falling to a 10-month low.

Bullish sentiment, expectations that stock prices will rise over the next six months, dropped 5.5 percentage points to 30.6%. Optimism was last lower on September 30, 2020 (26.2%). The historical average is 38.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.7 percentage points to 38.7%. Neutral sentiment remained above its historical average of 31.5% for the 12th time in 13 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 3.8 percentage points to 30.6%. Pessimism was last higher on February 3, 2021 (35.6%). The historical average is 30.5%.

At current levels, all three readings are within their typical historical ranges.

Timing likely played a role in this week’s results. We send out a reminder to take the survey to a rotating group of AAII members every Monday. The stock market started this week on a down note.

In this week’s special question, we asked AAII members which factors are most influencing their six-month outlook for stocks.

Many respondents list more than one answer. The coronavirus pandemic is the most cited factor, cited by 25% of all respondents. These individual investors note both signs of a recovery and the threat of new variants. Trends in government, corporate and consumer spending are listed by 22% of respondents who indicate that government, corporate and consumer spending is a key factor. Inflation is in third, picked by about 18% of respondents. Other factors include politics, future interest rates, stock and bond returns, valuation and volatility.

Here is a sampling of the responses:

• “I am bullish due to fiscal and monetary policy. There is so much stimulus, combined with recovery from the coronavirus pandemic, that our economy is roaring, at least for the next six months.”
• “I think we will have persistent low interest rates, good corporate profits and an easing of the high inflation numbers.”
• “Excessive government spending combined with proposed tax increases will result in a weakened and possibly recessionary economy.”

See more Sentiment Survey results.